Cost Center Accounting 2

Meaning of Cost Center Accounting Part II


Distribution of costs

In order to carry out the cost center accounting correctly, you first have to assign the costs from the cost type accounting to the correct cost centers – namely where they actually occurred. To do this, first look at the cost type plan, where all primary costs are broken down according to cost type (production material, rent, wages and salaries, etc.).

The costs have already been divided according to the respective cost types. The second step is to distribute the overhead costs within the cost center accounting. For this you need a company accounting sheet (BAB).

Distribution of overheads with the help of the BAB

According to, an operating accounting sheet, called “BAB” for short, is used to distribute the overhead costs to the cost center and is therefore a central element of cost center accounting. It is therefore important to find out where the costs actually occurred in the company. How does it work? For this you need the right reference value. This must either be worked out yourself or is already specified in the company. Attention : If you have several types of costs, you also have several reference values.

Typical reference values ​​are:

  • m² for rental costs
  • Number of people with salary costs
  • kw / h with electricity costs
  • Working hours for auxiliary costs

Let’s take a closer look at this procedure using an example from practice:

An electricity bill is available as overhead costs. Each cost center draws electricity, but in this example we want to find out what the consumption per cost center is.

As a distribution key for the assessment basis, we use the actual power output in kw / h.

The electricity costs for the entire month are 5,000 euros. We divide the total amount to the respective cost centers. We do the same with all other overhead costs (salary, rent, etc.).

The following applies as self-control after completion of a BAB: The sum of the overhead costs is also the sum of all main cost centers. It is therefore always a matter of allocating the costs incurred as precisely as possible.

Differentiation between primary and secondary cost accounting

In internal accounting, a distinction is not only made between direct and overhead costs, but also between primary and secondary costs.

Primary costs

Primary costs are also often understood as primary total costs . This is the sum of the costs of products or services that the company typically does not manufacture itself, but rather procures externally. The costs incurred are then assigned to the cost center and offset. The operating costs are also included in the calculation.

Examples of primary costs are, for example, wages and salaries , rental costs and office costs . In addition, primary costs can be divided into different types of costs:

  • Personnel costs
  • material costs
  • Resource costs
  • External service costs

Secondary costs

In secondary or secondary overhead costs is costs caused by products or services are produced which the production company itself and consumes. In contrast to primary costs, these costs cannot be assigned to an exact cost center, so you pass them on to several cost centers. In addition, secondary costs can be divided into variable and fixed costs .

Secondary costs are part of the internal exchange of services and are allocated to the cost centers via cost allocation.

Primary cost accounting – example

Let’s take a look at an example from practice:

We have a company and need new office supplies such as folders and writing materials for distribution. The costs incurred here are therefore primary costs. If a machine breaks down in production and it is repaired by an externally contracted company, this is also referred to as primary costs, since the service is obtained from outside.

Secondary cost accounting – example

Let’s also assume that there is a broken machine in production. However, this is maintained and repaired by an in-house technician. We can assign the costs for the repair to the “Production” cost center, but not to a specific product. After all, the in-house technician not only takes care of machine A, but also of all other technical devices, so the hours worked are allocated to the secondary cost allocation with the help of the operating accounting sheet.


A properly carried out cost accounting creates an economic image of the company in the form of numbers and this forms the basis for billing internal services. The result is of great importance above all for long-term strategic planning, since cost accounting and in particular cost center accounting really show where which costs are incurred – this also makes it clearer which revenues can be achieved by which products. The processed data can be used in a variety of ways and is an ideal basis for strategic decisions.

Controlling can, for example, carry out a target / actual comparison for each business period and thus draw an assessment. Based on the evaluation and interpretation of the results, important decisions are made, plans are made and controls are carried out in the company. The cost accounting is therefore an important documentation, planning and control instrument for every company.

Companies that have their cost accounting under control can gain long-term advantages over their competitors. The better you know your own company, the more precisely you can plan, the closer you can calculate and the fewer unnecessary costs will arise. Good controlling, which keeps an eye on the cost allocation and structure of your company and can adjust figures accordingly, will save money in the right places in the future and thus maximize the company’s profit.

Cost Center Accounting 2